Penn West to sell Mitsue-area properties

CALGARY – Penn West Petroleum Ltd. has agreed to sell its properties in the Greater Mitsue area of central Alberta for $192.5 million cash.

Money from the sale will be used to reduce the Calgary-based company’s debt.

It’s the first major sale of non-core assets for Penn West since it announced two weeks ago that it was cutting its workforce by 400 full-time employees and contractors, suspending its dividend and cutting compensation for its directors.

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It also announced on Sept. 1 that it would sell a number of non-core assets, including the Mitsue properties, to reduce overhead costs. It said at the time that the Mitsue properties produced the equivalent of 4,500 barrels per day.

Penn West didn’t disclose the buyer but a second company announced about the same time that it has acquired properties in the same area that produce 3,300 barrels per day of crude oil and liquids.

Cardinal Energy Ltd said it would pay $129 million for its acquisition of light oil producing properties in the Mitsue area. It said CIBC and RBC would lead a syndicate of underwriters to provide $100 million towards funding the purchase, with the remainder coming from its credit agreements.

Penn West has said it’s aiming to keep its capital spending within cash flow generated from operations, despite the dramatic decline in oil and gas prices since the end of 2014.

It says the sale of the Mitsue properties will raise total proceeds from asset sales since June to $605 million.